DoT plans to transform India into manufacturing, export hub of 5G gear

In a bid to transform India into a manufacturing and export hub of 5G equipment, the department of telecommunications (DoT) has called a meeting on Wednesday to discuss with key stakeholders a plan to roll out a productivity-linked incentive (PLI) scheme for telecom equipment.
 
The move will encourage global telecom gear makers like Ericcsson and Nokia as well as Huawei (provided it gets FDI permission) to export from the country. 
 
The proposed scheme is in line with PLI schemes which have been earlier cleared by the Cabinet for manufacture of electronics and mobile devices.
 
The PLI scheme under discussion provides incentives to manufacturers between 4 per cent and 6 per cent for a period of five years. But international companies must make incremental investment of over Rs 600 crore in four years and export products between Rs 1,000 crore to Rs 3,000 crore per annum. The scheme will help manufacturers reduce the cost disadvantage they face in India compared with China, which is at 17-20 per cent, and Vietnam (8-11 per cent), the two key competitors.

 
The meeting was called after the Cellular Operators Association of India (COAI) communicated, on May 14 to the DoT, that there was no industry consultation on the proposed draft being prepared by the ministry.

Under the scheme, international companies could make specified telecom products in India. These include 5G next generation radio access network equipment and associated systems, 5G base station and core equipment, switches, routers, optic fibre cables and digital microwave radios, among others.
 
Homegrown companies will also get similar incentives under the PLI scheme. However, the condition for investment for these companies is only Rs 40 crore for five years. Sales of products should be a minimum of Rs 100 crore in the first year to Rs 300 crore in the fifth year.
 
India currently is heavily dependent on import of telecom equipment. It imports equipment of over Rs 1.30 trillion while exports are a mere 11,500 crore. This clearly shows the huge opportunity that exists.
 
Currently, Nokia and Ericsson have manufacturing facilities and undertake some exports. However, homegrown companies that have been pushing for support from “Make in India” could also take advantage of the proposed plan.   
 
The scheme will require an outlay of Rs 17,616 crore to pay for incentives. However, it is expected to generate incremental export revenues of Rs 2.17 trillion in just five years, making India a key manufacturing destination for telecom equipment. It can also generate over 100,000 jobs based on estimates. 
 

There is a similar scheme for mobile devices. It provides incentives to international manufacturers in case they export phones worth over $200 million. Also, they have to invest Rs 1,000 crore incrementally and sell between Rs 5,000 crore and Rs 25,000 crore per annum during a five-year period.
 
This has already attracted the big boys that include Apple, which is planning to shift some capacity from China, and South Korean giant Samsung.